COVID-19 uncertainty index in Japan: Newspaper-based measures and economic activities

Abstract

This paper measures economic uncertainty induced by the COVID-19 using a newspaper-based approach in Japan and examines its economic impact in the VAR model. We specify two types of uncertainty indices and structural shocks: epidemiological and policy-related uncertainties. The constructed indices can trace well the events related to COVID-19. We then find that stock market variables respond significantly to a policy-related uncertainty shock, while real variables such as mobility and consumption are significantly affected by an epidemiological one. These findings highlight the importance of considering different types of uncertainty to assess the impact of COVID-19 induced uncertainty on economic activity.